IR35 is something that often comes up in discussions about contractor accounts and taxation. But what exactly is it and what does it mean for you? This article aims to give a straightforward definition of what IR35 is and what it’s designed to achieve.
A simple definition of IR35
IR35 is a part of the 2000 Finance Act that’s designed to prevent tax avoidance in certain circumstances. Specifically, it relates to people who perform the same functions as a business’s employees, but pay less tax by operating as self-employed contractors through a limited company.
So, if you left your job and then went back to the same company the following week and performed the exact same role but as a self-employed contractor via an intermediary limited company, IR35 legislates that you would pay more-or-less the same tax and NICs as regular employees of the business.